Is performance investing with a purpose a fad or the future? AU is putting its money on the latter.
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A new, first-of-its-kind course challenges 35 students from across campus to achieve sustainable gains through sustainable investments in environmental, social, and governance (ESG) funds. The Board of Trustees will invest 1 percent of AU鈥檚 endowment鈥攁bout $9 million, based on current market values鈥攊n ESG funds recommended by the class, cotaught by finance professors Randy Nordby and Timothy Timura, both Chartered Financial Analysts (CFAs).
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鈥淎t 麻豆传媒, we take experiential learning and sustainability to the next level,鈥 says President Sylvia Burwell of AU, which in 2018 became the nation鈥檚 first carbon neutral university and, two years later, divested itself of all fossil fuels. 鈥淏y connecting our students to the university鈥檚 endowment investment process, we are combining [their] passions with our expert faculty听to support our educational and financial goals.鈥
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ESG funds, which are expected to reach $1 trillion by 2030, according to CNBC, 鈥渁re becoming a tidal wave in the industry,鈥 Timura says. 鈥淧eople are investing for performance鈥攂ut with a purpose.鈥澨
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According to McKinsey, the E in ESG鈥攅nvironmental criteria鈥攅ncompasses carbon emissions and climate change and includes the energy a company takes in and the waste it discharges, the resources it consumes, and the consequences for living beings. S鈥攕ocial criteria鈥攆ocuses on the firm鈥檚 relationships, reputation, and the communities where it does business, along with labor relations and issues of diversity and inclusion. And G鈥攇overnance鈥攃omprises the internal system of practices, controls, and procedures a company adopts to govern itself, make effective decisions, comply with laws, and meet the needs of external stakeholders.听
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鈥淵ears ago, people were saying, 鈥業 want to save the planet, but I鈥檝e got to make money,鈥欌 says Nordby, a veteran of Calvert Investments, which pioneered socially responsible mutual funds. 鈥淏ut today, ESG is blossoming, and to me, it just feels better. It鈥檚 wonderful to make a profit, but it鈥檚 even more wonderful to make a profit and do something positive for the community and society.鈥澨
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Students will use data and resources from Morningstar and the CFA Institute, which offers an ESG certification, and work in consultation with AU鈥檚 financial advisor, Cliffwater, to evaluate money managers and alternative investments and make recommendations to trustees on the finance committee. And while the decision to buy or sell ultimately sits with the board, 鈥渟tudents are going to be right in the middle of the conversation,鈥 Timura says. 鈥淭hat speaks to the confidence the university has in the caliber of our students.鈥澨
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鈥淐reating ongoing engagement with our students and providing hands-on opportunities to help shape the university鈥檚 future is a hallmark of the AU experience,鈥 says trustee Jeff Sine, SIS/BA 鈥76, who chairs the board鈥檚 finance committee. 鈥淯sing endowment resources not only supports the program but also furthers our overall commitment to sustainable investing.鈥澨
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Spirited debate and rigorous research are at the heart of the course, which will be offered every semester beginning this fall. 鈥淲e will not get up there for three hours and lecture,鈥 Timura says. 鈥滻t鈥檚 learning by doing.鈥澨
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Students鈥攚ho applied for the class鈥攔epresent myriad schools, majors, and passions, which is illustrative of the interdisciplinary nature of ESG investing. 鈥淭here are many voices that are forming the E, the S, and the 骋,鈥 Nordby says. 鈥淚f all the students were finance majors, we would really be limiting the conversation.鈥
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鈥淲hen we met with some of the students, they were afraid this was going to be another portfolio optimization course that [relies on] advanced mathematics and statistics,鈥 Timura says. 鈥淎nd while there has to be some discussion of portfolio theory and investment analysis, the financial perspective isn鈥檛 sufficient on its own. We really are looking to students for their expertise and knowledge on a variety of issues: political, social, environmental.鈥澨
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No matter their major, alumni of the class are expected to emerge with r茅sum茅s that rise to the top of the pile. All but one of the companies in the Standard and Poor鈥檚 500 have a sustainability department, Nordby says, and investment in ESG funds soared to a record $400 billion in 2021鈥攗p 33 percent from the previous year, according to Barron's.听
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鈥淓SG is here to stay,鈥 Timura says, 鈥渁nd our students are helping to blaze the trail. In an interview for a job or an internship, they鈥檙e not just going to show transcripts, they鈥檙e going to have a real track record鈥攁nd that鈥檚 powerful. This really is a once-in-a-lifetime opportunity for students that鈥檚 going to make them incredibly competitive when they graduate.鈥
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When it comes to experiential learning and sustainable investing at AU, it鈥檚 a bull market.听听